Scandal blow to Sharon's leadership

Reeling ... Mr Sharon, flanked by disqualified candidate, Lieutenant-General Mofaz, left, and Chief of Staff, Moshe Yaalon, during a press briefing on the top of a hill near Salem military base in northern Israel. Photo: AFP

With the Israeli Prime Minister, Ariel Sharon, battling revelations that he is being investigated for fraud and breach of trust a new poll shows a sharp slump in support for his Likud party, already tainted by vote-buying scandals and links to organised crime.

The poll published in yesterday's edition of the liberal Ha'aretz newspaper shows Likud likely to win only 27 seats in the 120-seat Knesset in January 28 parliamentary elections - down from a projected 41 when the scandals broke last month.

According to Ha'aretz, the reversal in Likud's fortunes narrows the likely majority of the ruling bloc of right-wing and religious parties to one seat, down from a projected eight at the beginning of December.

Although Likud is still likely to be the largest party in the new Knesset there is speculation for the first time about whether Mr Sharon will be prime minister.

The latest scandal broke on Tuesday when Ha'aretz revealed that Israel's Attorney-General is investigating a secret $US1.5 million ($2.6 million) loan to Mr Sharon from South African-based British businessman Cyril Kern.");document.write("

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According to papers sent by Israeli investigators to the South African authorities, the affair goes back to 1999, when Israeli regulators ruled that Mr Sharon had benefited from improper foreign donations in his successful campaign to win the leadership of the Likud party.

Mr Sharon complied with an order to repay 4.7 million shekels of this money, allegedly informing investigators last March that he had mortgaged his large ranch in the Negev desert to do so.

According to Ha'aretz, however, the banks refused to mortgage the property on the basis that it is in fact leased from the Israeli state. Instead, Mr Sharon's sons Omri and Gilad raised a loan to repay the money, using Mr Kern's $US1.5 million as collateral.

Mr Kern, a close friend of Mr Sharon's since they served together in the Jewish independence movement, confirmed he had loaned the money but said it was a personal donation.

Mr Sharon denounced the report about the investigation as "disgraceful political slander", and said he would counter it with documents and facts. "Those who are spreading this political libel have one aim: to bring down the prime minister," he said.

The new scandal follows revelations last month that senior members of the Likud party had sold their votes and influence to candidates trying to improve their positions on the party's list for the Knesset, including people with criminal records.

The controversy throws a lifeline to Amram Mitzna, the dovish leader of the opposition Labour party, shown up two seats at 24.

Meanwhile, the Supreme Court yesterday overturned a ban on two Arab candidates in the general election and banned the Defence Minister, Shaul Mofaz, from standing. A court statement found against an elections parliamentary committee recommendation to bar Ahmed Tibi and Azmi Bishara from the ballot on grounds they expressed support for Israel's enemies.

The court disqualified the candidacy of Lieutenant-General Mofaz, a former army chief of staff, saying he had not been out of the army long enough to stand.